LONDON – Stock markets tumbled along with oil and the dollar yesterday as United States (US) president Donald Trump’s sweeping tariffs against trading partners kicked in, triggering strong retaliation from China.
Beijing slapped a higher 84% levy on US goods, sharply accelerating losses on European stock markets in early afternoon trading.
Growing fears of weakened demand sent oil prices to four-year lows, with international benchmark Brent North Sea crude dropping under US$60.
Paris and Frankfurt dived almost 4%, also as goods from the European Union now face a 20% tariff when entering the US.
London slumped 3.5%, with Britain having been hit with a 10% levy on Saturday.
Most Asian and European equities fell back into the red – Tokyo closed down 3.9% – a day after partially rebounding from sharp sell-offs on hopes that Washington might temper some of the levies.
But any hopes of a last-minute roll-back on tariffs were dashed, as the US hit China – its major trading partner – with tariffs now reaching 104%.
“The world’s largest and second-largest economies are now locked in a trade war, and neither nation seems willing to back down,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Beijing warned that China had “firm will and abundant means” to fight a trade war, state news agency Xinhua said.
Speculation that Beijing will unveil stimulus measures helped Shanghai and Hong Kong stocks buck the downward trend in Asian equities.
Pharmaceutical firms took a heavy hit after Trump said he would be announcing a major levy on the sector.
Europe’s most valuable company, weight-loss drug maker Novo Nordisk, dived more than seven%, and British pharmaceutical giant AstraZeneca shed 6%.
“Alarmingly, US Treasury markets are also experiencing an incredibly aggressive selloff… adding to the evidence that they’re losing their traditional haven status,” said Jim Reid, managing director at Deutsche Bank.
The sharp rise in yields on US government bonds triggered similar increases to borrowing costs in the United Kingdom and Japan, as expectations for global growth and spending diminished.
“It feels like no asset class has been spared, as investors continue to price in a growing probability of a US recession,” Reid added.
Foreign exchange markets were similarly rattled yesterday – Beijing has allowed the yuan to weaken to a record low against the dollar, while the South Korean won also hit its weakest since 2009 during the global financial crisis.
Safe-haven yen rose more than one percent
South Korea unveiled a US$2 billion emergency support for its crucial export-focused carmakers, warning Trump’s 25% tariffs on the sector could deal a terrible blow.
To help shore up their economies, India and New Zealand’s central banks cut interest rates.
Fears that Trump’s blow to commerce will spark a global recession saw Wall Street reverse healthy opening gains to end deep in the red on Tuesday – the S&P 500 finished below
5 000 points for the first time in almost a year.
– Nampa/AFP